Reference of Dispute – To Arbitration

Once there is an agreement between the parties to refer the disputes or differences arising out of the agreement to arbitration, and in case either party, ignoring the terms of the agreement, approaches the civil court and the other party, in terms of Section 8 of the Arbitration and Conciliation Act, moves the court for referring the parties to arbitration before the first statement on the substance of the dispute is filed, in view of the peremptory language of Section 8 of the Arbitration and Conciliation Act, it is obligatory for the court to refer the parties to Arbitration in terms of the agreement, as held in P. Anand Gajapathi Raju v. P.V.G. Raju, (2000) 4 SCC 539.
It was further explained in Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleums, (2003) 6 SCC 503, thus:
“In cases where there is an arbitration clause in the agreement, it is obligatory for the court to refer the parties to arbitration in terms of their arbitration agreement and nothing remains to be decided in the original action after such an application is made except to refer the dispute to an arbitrator. Therefore, it is clear that if, as contended by a party in an agreement between the parties before the civil court, there is a clause for arbitration, it is mandatory for the civil court to refer the dispute to an arbitrator.”
In Magma Leasing and Finance Ltd. v. Potluri Madhavilata, (2009) 10 SCC 103, the position has been restated holding that no option is left to the court, once the prerequisite conditions of Section 8 are fully satisfied. Sundaram Finance Ltd. v. T. Thankam, (2015) 14 SCC 444.

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